Final answer:
A bulk reducing production process significantly lowers the weight of the product, making transportation less expensive. Such operations are located closer to raw material sources to minimize transportation costs. Furthermore, understanding economies of scale is vital for cost efficiency in larger-scale production.
Step-by-step explanation:
The production process in which a sizable weight loss occurs, making the final product cheaper to transport than its components, is known as a bulk reducing process. In industries with bulk-reducing operations, the raw material orientation is an essential consideration. These factories are optimally located the closest to the source of raw materials because the weight reduction during manufacturing results in a lighter, hence less expensive, product to transport.
For instance, in bulk reducing industries such as iron or paper manufacturing, the end product like steel beams or paper is lighter than the raw materials of iron ore or logs, reducing shipping costs.
Understanding economies of scale is also crucial in production technology decisions. As firms scale-up production, the cost per unit can decrease, benefiting consumers through reduced price points. This principle underlines the strategies of large retailers like Costco or Walmart, where high-volume production allows for lower average costs.